Real Estate Split – Another Solid Value Creation Initiative: Systematix

Raymond Ltd.’s stock has been on a tear over the past month as the date for the spin-off of its lifestyle business (July 11) draws closer. The stock received another boost following the July 5 announcement of the spin-off of its real estate business, which sent the stock up 10% on Friday, bringing the stock up to 49% over the past month.

It has been one of our most compelling ideas for some time, but our price target has been exceeded well beyond our expectations. The main reason for this massive re-rating, in our view, is that the market is recognizing the potential of the growth levers outside of lifestyle – real estate and engineering – which were previously undervalued but have now come to the fore with the spin-off announcements.

In addition, the lifestyle business is also being revalued as it has been recognized that it is a predominantly B2C business and valuations are close to those of a B2B clothing business, which we believe has even more potential.

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